Posts Tagged ‘Credit Card Debt’
JPMorgan Chase has agreed to pay out nearly a billion dollars to close investigations related to the 2012 “London Whale” trading fiasco, and now is told it must pay out $309 million in refunds and $80 million in penalties over illegal credit card charges for ID and fraud-protection services customers never ordered.
In order to sign up for a credit-monitoring service, a consumer generally needs to give his/her permission in writing. But according to the CFPB, between 2005 and 2012, Chase just went ahead and enrolled 2.1 million consumers in credit card “add-on” products — like identity-theft protection and fraud monitoring services — that promised to monitor customer credit and alert consumers to potentially fraudulent activity — without getting the requisite permissions.
Furthermore, Chase began charging credit card customers immediately upon enrollment, even if they were not actually receiving the services yet. Monthly fees ranged from $7.99 to $11.99, even though Chase was not always performing the paid-for services.
In some cases, these charges caused cardholders to go over their credit limits, leading to additional fees on top of the ones they shouldn’t have been charged in the first place. And then there’s the interest accruing on these fees for cardholders who didn’t pay their balance in full each month.
Chase began proactively issuing refunds to affected customers in late 2012. Those who still have credit card accounts with the bank should have received a credit on their statements, while those who are no longer with Chase should have received payment by mail. Those who were illegally charged for these services but did not receive a refund should contact Chase.
The amount of the refund should have been for the total of any illegally charged fees, interest, and any over-the-limit fees resulting from the charge for the product.
This adds up to $309 million in refunds for the bank. Additionally, it was hit with $80 million in penalties — $20 million going to the CFPB and $60 million to the Office of the Comptroller of the Currency, which initiated the investigation.
Article Source: Chase To Pay $389 Million Over Illegal Charges For Credit-Monitoring Services
Study Shows Many Choosing to Pay Off Debts While Sacrificing Needed Health Care to Save Money
A recent study conducted by sociologists at the University of Michigan found that people who are ill and do not seek treatment because of the cost are more likely to have credit card debt than any other form of debt. The study, co-authored by Lucie Kalousova, Ph.D. and Sarah A. Burgard, Ph.D., found that individuals with credit card debt and medical debt were more likely to forgo medical care than those who were in debt as a result of student loans, housing loans and car loans.
More than 64% of those who were ill but had not seen a health care provider because of the cost reported that they were indebted to credit card companies. Nearly 58% of the same group said they already were dealing with medically related indebtedness.
Consumer advocates speculate that financially-distressed Americans would rather “work through” their health issues and skip a doctor’s visit in order to use the money to pay off debts such as high-interest credit card bills. For many it would be a much harder pill to swallow if they were late or missed a payment triggering annoying phone calls and harassment from debt collectors.
With so many Americans living paycheck to paycheck, the decision to forgo or significantly delay the treatment of illness is causing the sick to slow their recovery or become increasingly ill as their condition deteriorates. They also could end up paying much more to regain their health. Their productivity and income can be diminished. They also tend to put more strain on hospital emergency rooms and other public health facilities.
Experts, both financial and medical, remain sympathetic to the plight of the working American but encourage accessing health care when needed and being proactive in asking creditors to work with them on a modified payment schedule. While many credible debt collectors are willing to make alternative payment arrangements, more aggressive and unscrupulous debt collectors may ratchet up their efforts and violate the Fair Debt Collection Practices Act (FDCPA) in the process.
Don’t let the prospect of debt collector harassment stop you from seeking the medical care you need. Under the FDCPA, consumers are entitled to free legal representation (the offending debt collector is mandated to pay by lay) and, in some cases, awarded up to $1,000 in damages. Call 1-800-NOT-FAIR today if you think you have been victimized.
“Debt and Forgone Medical Care,” co-authored by Lucie Kalousova, Ph.D. and Sarah A. Burgard, Ph.D., published in the April 2013 Journal of Health and Social Behavior.
Credit Card Debt Causes People to Forgo Medical Care
In a series of 2009 and 2010 transactions, Bank of America sold credit card receivables to an outfit called CACH LLC, based in Denver. Co. Each month CACH bought debts with a face value of as much as $65 million for 1.8 cents on the dollar. At least a portion of the debts were legacy accounts acquired from MBNA, which Bank of America purchased in 2006.
The pricing reflected the accounts’ questionable quality, but what is notable is that the bank could get anything at all for them. B of A was not making “any representations, warranties, promises, covenants, agreements, or guaranties of any kind or character whatsoever” about the accuracy or completeness of the debts’ records, according to a 2010 credit card sales agreement submitted to a California state court in a civil suit involving debt that B of A had sold to CACH.
In the “as is” documents Bank of America has drawn up for such sales, it warned that it would initially provide no records to support the amounts it said are owed and might be unable to produce them. It also stated that some of the claims it sold might already have been extinguished in bankruptcy court. B of A has additionally cautioned that it might be selling loans whose balances are “approximate” or that consumers have already paid back in full. Maryland resident Karen Stevens was the victim of one such sale, which resulted in a three-year legal battle (see related story).
Some industry observers said that the language in Bank of America’s sales documents should be regarded as standard legalese intended to protect it against a disgruntled buyer’s legal claims. And even though Bank of America refused to stand behind the accuracy of the records it sold, debt buyers are the ones who make the call to sue.
“The buyer has the primary responsibility to test the … quality of what they’re buying,” says Samuel Golden, a former OCC ombudsman who is a managing director at consulting firm Alvarez & Marsal in Houston, Texas.
Collectors’ responsibilities aside, other banks’ sales agreements suggest Bank of America’s standards are emblematic of wider industry practice that raises risk management concerns. For less than $1.2 million a month — a rounding error on B of A’s income statement — the company sold CACH accounts that raise regulatory and reputation questions about the accuracy of its records and its disclosures to courts.
Bank of America Sold Card Debts to Collectors Despite Faulty Records
The collection agency of Pressler & Pressler has a track record of wrongfully identifying consumers and strings of violations of the Fair Debt Collection Practices Act. In a recent case, Mr. Mark Hoyte was wrongfully identified by Pressler & Pressler as a debtor who owed $919 on a Sears-Citi credit card.
Pressler & Pressler hired a law firm specializing in debt collection to contact Mr. Hoyte about collecting on the debt. When Mr. Hoyte explained to them that he had never owned a Sears-Citi card, the law firm asked for personal information to verify the debt was not his. They asked him about the last 2 digits of his Social Security Number and his Date of Birth for verification. They didn’t match.
Despite this, Pressler & Pressler continued onward and the law firm prepared a lawsuit against Mr. Hoyte, who received a summons to appear in court to defend himself.
Read more on this story here: Hello, Collections? The Worm Has Turned
Timothy McCollough freely admits that he stopped making payments on his Chase Manhattan credit card in 1999. He says he did not have the means to pay after he was disabled by a head injury that cost him his job as a school security guard.
But more than a decade later, Mr. McCollough, who is 52 and lives in Laurel, Mont., is still haunted by the unpaid balance, which was originally about $3,000.
In 2007, he was sued a second time over the debt, and this time the suit contended that he owed significantly more: $3,816 in credit card debt, plus $5,536 in interest and $481 in legal fees. As he did the first time, Mr. McCollough sent a handwritten note to the court explaining that the statute of limitations on the debt had passed.
“I have had no dealing with any credit card in 8 1/2 years,” he wrote to the court. “The pain they caused is worth more than the money they want.”
Mr. McCollough is not the only borrower being pursued for a balance that has expired. Such claims are routinely sold on debt collection Web sites, where out-of-statute debt is for sale for a penny or less on the dollar.
In most states, it is legal for collectors to pursue out-of-statute debt, as long as they do not file a lawsuit or threaten to do so.
But some lawsuits are filed anyway, and consumer groups and even some industry consultants argue that collectors routinely harass debtors for unpaid balances that have exceeded the statute of limitations. In some cases, collectors have unlawfully added fees and interest.
“It’s so cheap, if you can work it smart, you don’t need to collect that much,” said John Pratt, a consultant to the debt-buying industry and an author of “Debt Purchasing: An Investor’s Guide to Buying Debt” (Morris Publishing, 2005). He said investors in old debt generally hoped to recoup two and half times what they paid for a group of claims.
Because collectors cannot sue on old debt, he said, they are more likely to resort to abusive tactics. “Time-barred debt is where the worst abuse has occurred towards the debtor,” he said.
In a report issued July 12, the Federal Trade Commission called for “significant reforms” in the debt collection industry and recommended that states change the murky laws that govern out-of-statute debt.
The statute of limitations for debt varies by state, generally from three to 10 years. In many states, collectors can restart the clock if they can persuade the consumer to make even a tiny payment toward the old debt. Debt collectors generally do not tell consumers that making a payment will revive the debt so it can be legally pursued.
Read more of this NY Times article here.
JPMorgan Chase & Co.’s credit-card contracts will no longer require disputes to be settled through arbitration, a practice that lawmakers said was biased against cardholders, to help settle an antitrust lawsuit.
After a class action suit was filed by Philadelphia based law firm, Berger & Montague PC, the company stopped using arbitrators in July. Lenders including Bank of America, Citigroup Inc., Discover Financial Services and Capital One Financial Corp. secretly met or consulted for the purpose of requiring their cardholders to arbitrate all disputes.
Read the full story here:
JPMorgan Pulls Arbitration Clause From Card Contracts
It’s the “American Way”, turning opportunity into profit. It is certainly the way of the debt collector in these hard economic times with 15.1 million of the working class unemployed, 1/3 of which have been for six months or more. With people facing foreclosures, credit card delinquencies and utility shutoffs, the last thing they need is debt collectors harassing them day and night.
US News and World Report puts the average household consumer debt at $22,231, not including other debt such as student loans, which adds another $10,208, according to a May 2009 report. This debt has provided fodder for the explosive growth of debt collection agencies, which have grown in number between 4 to 6 times over the past few years to relentlessly pursue those on the lower end of the economic scale.
Read the full story here: The American Way of Debt: Turning a Profit by Preying on the Poor